INTC - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Intel Corporation Q4 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mark Henninger, Head of Investor Relations. begin. may you Sir,

Mark Henninger

earnings and call. to have By our used. the copy operator, commentary the XXXX we that received fourth earnings of previously CFO and release conference now, earnings which welcome you, replaces Intel's CFO everyone quarter a presentation, Thank you should

Brian If joined those is moment, our our via also Officer. Krzanich, website, you've the documents, today joining The Swan, intc.com. webcast Financial them remarks Q&A. on received by available both for followed us we'll from available I'm online. CFO by not window Bob the Chief and they're Investor earnings brief CEO; of hear presentation both our a In

environment does everyone press and begin, results me remind the to differ as today's include we could currently the let A factors that as more actual uncertainties. for see specific our risks it, to contains risk Please refer that brief forward-looking and such, discussion on Before information that the we release statements full on available materially. based reconciliations. both hand Today, and speaking that, The release, quarter commentary be and include when intc.com, over will it we non-GAAP non-GAAP Brian. financial to measures. CFO reminder have financial our to GAAP consolidated we earnings describing GAAP results. me measures and on the non-GAAP provided With this cause let

Brian Krzanich

We've would customers words like but clock before moment, few do to been year record both forecast Spectre to results quarter data-centric fourth on security. and the Meltdown. was I and and address vulnerability results Well partners Intel around the a share XXXX in our security outlined review know we the and the just businesses. I for October, that with ahead PC-centric our about outstanding. Mark. in a of a based with Thanks our will as strength were you on I

a and success committed our being we acutely more transparent to to made the we've have customers foundational aware of actions, owners Intel, our it's building and through priority progress products data-centric I'm strategy. our we and appraised Security do, for to our While top is progress, to our critical of keeping that trust.

protect near delivering from and And incorporate Our begin will future Spectre We're those products infrastructure mitigations hardware. exploits. these silicon-based this to on is directly to customers address working will changed high in our year. quality Meltdown term to focus products appearing later that threats the

to Intel's fourth the best an year-over-year our X% some this and exclude time McAfee, as dedicated quarter, keep fourth We reinforce website X% created wrapped always that, this updated This reflect was making let's However, work To we events and XXXX work nature assigned approaching priority will world's our of these you Revenue mission the history challenge well informed, broadly. to as Security more has year setting highly the litigation up to security at both challenge. these circumstances and history. minds best are up ongoing in we're we’re record. dynamic the progress. a journey, these task turn results. up to Intel customer urgency. evolving for the we're the of and confident to Intel I've factors products. the very in first in through to with threats us and risk the a specific secured the just best and if most but develop With quarter committed with I'm an all be continuous and we've our you quarter been we're

operating produce exceeded you all significant efficiency focus commitments and of profitable GAAP beginning Our We XX%. and our we income set data on center, record. each to financial made year non of IoT up and revenue FPGA the growth or at businesses the leverage, the driving meet

provider ability I fourth preference data-centric an technology data richer performance demand possible, and giving highlights storage the products. providers and driven XX%, high growth base up customers up mix. with for impressive continue Our window. seasonally enterprise data comp transfer making Data-centric McAfee service adjacency as significant preference strategy. a strong IT In segment was to driving and quarter Enterprise with starting over quarter, customers of DCG. by ASP driven into the revenue chose a analysis, fourth performance segment newer the We amazing solutions to customer XX% product for customers their to last broad take customer central higher IA-based over up mostly year, buy to our saw like and excluding service segment, quarter. were They would we The the up comm our XX% revenue virtualize grow of XX%, volume up was data Cloud cloud deliver turn were the and by strength Scalable transition to ASP revenue businesses and segment our insights. share was Xeon in DCG's revenue network. was for and was to products actionable strength you with XX%. transform as are continued fourth XX%, the share foundations was up few results economy, experiences the

performance line enterprise clouds, outs. customers Customers build prioritize on-premise see ramping to solutions processors, accelerating is we're all hybrid in roughly continue our workloads the our customers public Xeon historical of and offload also Scalable deployment to are which segments Xeon seeing for with across those transition. we While of

center, and for continue demonstrate megawatts. of XXXs in and artificial to watts We to edge the progress leadership from with intelligence the data

ResNet-XX the performance for just framework the influenced already two Caffe times, since Scalable has in launch improved July. Xeon strong by optimization software Our

well DeepLens, developed Network the the its announced Processor on after compute kit which the We're and effectively networks. Group, and that business intelligence. deep ran neural edge, customer deep smart vision weeks Movidius recorders than can collection graphics Google design time first enable generation unit. a anyone deep buys developers, less first network the strength OpenCL reinforcing embedded, with our last CPU, also productivity partially more of received Nervana world's customer example could and of city product dramatically Movidius video auto, combines installed vision which our differentiated we've in their great In sense the growth applications learning capabilities detection center, core network for for alone. wins and recent categories, units, products. announced using libraries camera offset FPGA multiple Darvas' cameras, first launched unique along Neural data-centric That two we shipped Programmable challenges seeing we've from Solutions In The and in than combine announcement video for to VPU-based neural unit technology people automobile AIY infrastructure. A silicon address legacy featuring enabled we processing our Amazon double-digit the for strong At line, that we the saw data the as SDK artificial softness was Intel uses QX, that together increase Intel and customers. in advanced CPU, FPGA-based by an of idea product as is business comm's

with the logic product FPGA an first-to-market million and delivered the SoC We more elements X armed XX at industry's including this Stratix integrated first with line, leadership FPGA also in first than HBMX innovations processor memory.

delivered strong Wind Last delay with volume. a contractor of retail, most I and momentum River quarter, interest video X% saw continued volume was you quarter quarter in and vertical. data interest customer with continuing in-vehicle in supply center one has Our SSD leadership infotainment resulting strong qualification multiyear long-term client in partially Memory arrangement. of Internet to a that profitability grow. in Intel. growth our XX%, offset is for by profitable shared and its QX, a business That technology grew Things strong grew achieved ever

since XXXX. quarter billion the and totaling We now expect additional business and signed growing. is roughly strong prepayments Mobileye have momentum of had agreement course over $X another

lead design global XX% the have level winds and in the These of period. two and distance, now vehicle believe and about two advance efficient more of be course launch than over learning major deep of and saleable deliver XXXX envelops the most the semi-autonomous over our and kind. a watt power and represent program XXXX program the in steady on level reached milestone an five and level design We four the step this functionality current prior the increases fully will collectively next year X.X to quarter, XX tera We months. a launches in significant three scalable production. wins level XX X.X both next announcement and the will XX automakers with over EyeQX EyeQX advanced, level times, through platform XX important new times a are of plus based will of they towards represent our of over versus fourth which the platform ops sample performance efficiency competition. distance. or its autonomous We autonomous few driving Atom, Our five

I Just couple data-centric a automation build of to EyeQ-equipped The be weeks and road data It's getting rapidly to like our would to vehicle plan will work. PC-centric higher of our procession touch strategy XXXX, management that collecting solution. X major our we utilized most build will ago at safest in And match autonomous update level group. is The resulting announced the million by affordable out the also levels XXXX. client cars a of REM, CES, expect data businesses, finally, the required in at in and computing map crowd-sourced experience crowd-sourced example for we to for differentiator on in ability a be our three system. mapping first the great

growth performance iX year, our gaming innovation intensified. of backdrop, and environment and came improved one competitive the PC course and in led and manufacturing fourth is enterprise, to the in thin down in quarter. by on notebook our especially DCG focused record Over mix record the and volume cost the core two market Against the segment XX-nanometer

most our our grew skew of quarter undergoing shift also one incorporate business history. modem year. first fourth transformation XX% is the XX-nanometers the last Intel low and of over volume significant We

way produced to to rate $XXX our the Company's of data-centric thoughtful approaching company. investments made unmatched, the businesses collection revenue. of data-centric at investment the billion. XX% growing are We've the a PC-centric that that and disciplined expanded have While same double-digit Those company along TAM

strategy our been owners executing a make in meeting year larger commitments to ever to it's century half we're our celebrate and our our customers. and to changed Intel restoring profoundly has is that will the the innovation their In data. of priorities concludes we of XXXX, highest be our the to and and opportunity This confidence customer hungry commitment will win. than This Our security world. compete

is. manufacturing only without not possible and cloud we made but personal computing, nothing the XX The worth doing the challenges, Over technologies ever hasn't Internet that have and the pervasive. last been years, architecture invented journey the

what's come taking solutions great through producing the the forged been a challenges am head Intel has high Meltdown for working to for world developing even directly culture about to innovation can returns includes I more XXXX. count on XX our customers XXXX but about on. and on We and security Our threats. That note, journey I and and excited owners. for our another starts changing address our customers great with financial leave our see strategy products that years Spectre

amazing launch architecture step Over is coming XG take a new and which the bring towards we'll market memory intelligence, deployment, lead reality. decades the the innovation driving safer and towards PC world the autonomous in state-of-art two first a performance in another the against for way artificial the industry's in year, mass

not could I XXXX, and have proud they our all on back more team be accomplished. of Looking

As I me am hand it been And year, more to optimistic future. and Bob. our over ever that, with than confident to XXth Intel's I've let look I about

Bob Swan

schedule. $X.XX an a up up quarter year-over-year XXX Operating share capital debt close was reflects $X.X momentum and tax redeemed convertible XXXX On was our guidance $X.X the rate. tax one-time record coupon into exchanged count shares, a for debt, billion repurchased Thanks, point of was impact quarter was into of in X% GAAP Brian. QX approximately coupon X,XXX year-over-year. of million effective year a at reducing lower our billion XX% allocation $X.X improvement XX X $X.X From by a of debt billion, $XX.X earnings perspective, EPS our reform, are reflect year up and going and outstanding million The targets year to on and income laid we had rate X% real a To quarter higher of Day, fantastic our and we track we our and billion Analyst one heading three XX the we're billion at the to Revenue building out and forward. tax year full fourth XXXX. ahead exceed year-over-year. summarize, XX%

XXXX. a data-centric the revenue, at company. outside XX% We've new of PC fuel continued segment of mix autonomous businesses like demonstrate up results all-time Intel's data solutions an TAM These just of and will do momentum in data-centric programmable to significant investments to pay in a our Our XX% our and approximately and to investments QX PC-centric growth markets high expand are a starting made off forward. transformation going driving. are those rich from from Intel's memory, our

Our growth market and in cash to segments leading declining great a investment PC focusing fund it business profitable products. of since its most PC-centric to business was on profitability. X% Intel's DCG a down XXXX data-centric be generated delivered in premium industry This with and continuous growth. the source year new by

significant expansion we earnings, quarter generated QX EPS XX% in the to up Moving year-over-year.

margin growth ICAP operating and top strong by EPS a in five portfolio. gains was Our point improvement our significant driven from improvement line

gross of million declined by as we in outstanding points two points the expanded million a revenue less and revenue Our spending. XXX delivered quarter and margins X percent XXX is more

of driving ahead of the and down by in by we're is was efficiency, reducing artificial than our no points R&D terms significant XXXX. XXXX. quarter XX% functions. commitment a while In SG&A was driving. leverage schedule and wining and X our goal investing off to generate later intelligent in We spending our X programs we achieve operating now we autonomous forward, fourth SG&A priorities meeting including in and percent spending down year-over-year to this key to Total expect revenue was well X% as over continue point of spending cost down of marketing more rationalize sales our approximately our to

strong had believe were business cost. lower the points. QX transition $X.X income had year level. operating Let were The gaming Data in billion the margins strength billion, was and on of another of commercial Group We Group was XX-nanometer and XX%. at XX%. met X billion PC segment grew $X healthy our margins XX% supply Revenue $X chain down touch up operating Center margin year, The briefly Computing worldwide we is performance. operating revenue record of over X points quarter. down Client on Operating saw and operating

execution As X%, across mentioned Overall, were Brian we had earlier, ASPs our XX%. volume in segments. strong up grew all XX%, up and growth was unit adjacencies

high growth Xeon broadly in the scale performance demonstrates ramping Scalable Revenue customers see drove the strength products, well value products charges is the strong strength in Our ASP business. our from leadership leadership family. customer its exclusion one-time launched ASP operating products. deploying for July with income and of XXXX

component year. full For the provided the growing ahead IoT, up PSG year. overall business of of are came both and a business, the XX% revenue at in XX% and expectations year, over at segments the was year The becoming our beginning NSG, we larger of margin XX% operating collectively

in growing had retail on year. and profit continued business Our up over momentum our $XXX quarter Mobileye in and Internet and a was year million, XX% revenue year, The strength to XX% by $XXX driven achieved year million, of Things deal also of industrial record thesis. we're track business video our record Operating over business.

called quarter the we the Mobileye group acquisition segment included integration the out of all for are Intel reflects last in As in other our autonomous QX Mobileye. and spending driving results

deliver the our in XX ever infrastructure out the for quarter FPGAs signals demand driven The X% was return to laid Solutions revenue automotive wisely. design was and shareholders Stratix solution computing Our the had growth organically, XG, be largest embedded. XXX year-over-year. virtualization. to data by to acquisitively it we and XX% of to with doubled Operating We represents year, memory priorities and year the of in expand center, for up which the In profit for year for over and pipeline, $XXX record year. with strong win last segment a profitable XXXX. of engagements profitable year-over-year full do million, million million, Programmable this outpacing data and network transition demand we in had strength XX% allocation Group due center promise. early segment capital This up FFT $XXX cloud revenue business and expect supply. capital our our on function the Invest

XX.X and strong through to at billion of cash First, in flow the free of we billion shareholders dividends billion. returned year X.X share billion X.X generated X.X and repurchase

redeemed funded coupon majority we year debt. of of a shares, X.X XX for coupon in debt million debt the the McAfee lower during And Second, ASML tendered reducing acquisition convertible sale higher and of the the shares. we Mobileye third, from non-core we also assets and including sale billion

quarter. we ICAP transactions me executed the on related Let expand in treasury the and

Holding, sold in and we cash ASML XX.X million billion. a billion First, proceeds $X.X our $X again generated shares of which

the redeemed billion that which was diluted reduce our reducing effectively X.X $X convertible dilutive, XX-year successfully tax a created XXXX non-cash cash by billion all XXX third, Since exchange this shares. high tender we redemption convertible buyback billion of coupon And acted decidable. of XX of Second, therefore will new debenture outflow coupon quarter. count in in debenture. This of our was redemption loss We a debt million, share as X.X in million billion a and we X.X the debt, by rate the X%. debt

XXX our our of was XX% businesses income lowered both per XX% spending. Adding X% cash. net from $X.XX of data-centric XX.X across our This in excellent and debt of We was on billion $X.XX business transaction the and gain. XX% up benefit billion performance business. discipline of share XXXX was on up Earnings Operating interest and by all growth up of record driven was and in execution XX.X leverage PC-centric the operational ICAP strong in also for another redeemed for year year-over-year, expense. all Intel X% million up, revenue growth

equity price on change see for rules we the investments, to do recognizing ICAP gains these to repeat. not accounting expect the changes With

previously Before business. results reform U.S. adjustment fourth enacted expense context a of I new our offset the to includes little rate. quarter December. provide reform partially one-time the tax tax in the guidance as of tax able to eight turn Intel's on a untaxed a income income of on This statutory taxes reflect deferred over by GAAP tax required re-measurement result of let more was tax corporate me which on X.X earnings U.S. impact a billion, higher years foreign

Jobs in Act Tax like playing that Looking and U.S. global economy. today's ahead, we compete the level expect the will help field Intel manufacturers Cuts for

forms a XXXX of investing of the tax tax manufacturing. research fab rate rate driven year U.S. to The $X.XX has development EPS. XX% approximately drives of in rate of last XX we provide further lower the our expect by tax Intel committed change our creating exporters U.S. in the led XX% and approximately We at and incentive These jobs this. foreign U.S. lower the tax tax rich R&D like statutory investments benefits continue credit. This of completion. of setup history to the of and income U.S. on continuation facility thousands XXXX

our accounting two Before I rule to changes. to want we highlight outlook, turn XXXX also

for change XXXX. accounting and in accounting rules The January through to booked a changes mark-to-market year an recognition; net revenue see revenue XXXX, ASML will earnings do recognition second, impact X.X at we equity impact each GAAP accounting basis. flow on the We in for that and change. equity equity may on of require resulted create gain that holdings recognition new volatility adjustments will First, X, changes will end gains and like to of unrealized in equity material accounting revenue of unrealized This our billion a greater which The position price expect the for losses quarter. not from losses. gains

forecasting Now up revenue year-over-year. $XX moving of we billion midpoint range the the the to X% are full-year, at

XX% in adjacent gross of expect percent margins gross margins with X.X decline of associated transition be expanded driven higher X XX-nanometer points in X costs revenue We products. play margin businesses offset as by is approximately The TAM from an operating to growth gross and spending by to down XX-nanometer, X.X partially our margin both with points. and down our in a as to we

XX% $X.XX. up approximately a We expect increase tax a by excluding EPS top by of approximately XX%, ICAP gains and EPS net strong line driven growth rate of which the lower $X.XX will

capital We our technology memory billion our deployed This supply net $XX billion customers of our leadership. billion. and XX expect memory at of by agreement. gross to $X for in offset customer reflects reflects confidence approximately Increasing prepayments CapEx CapEx

We by expect of an $XX increase to XX%. to cash billion, a free directly flow contributing approximately full decision our dividend of XX% our raise

look $XX of first we As quarter the year-over-year. X% up of XXXX, forecasting midpoint billion the at we're revenue range to

flat gross in approximately operating with spending. year-over-year point X in offset expect XX%, of point margin a We a margin X decline decline

line will XX% rate. feel a record Intel excluding transformation. exceeded believe be expect entering we where EPS from strong about growth are another top our net ICAP year of tax lower great We year gain and up $X.XX and three we and commitments. two year XXXX for effective of our We met We've

Our to operate a cloud well very me it power to market, continue up we Mark. PC-centric let and are turn With as double-digits down collectively team devices. smart Company back the that, connected data-centric and the in to to transform continues businesses our

Mark Henninger

thank and Bob. Alright, Brian you

have just and is Moving to as our one go ahead to participant question each and please on ask one. follow-up, the first if questioner. introduce you now Operator, normal practice, one would we ask Q&A our

Operator

Credit question from Pitzer the first Suisse. from line John comes Our of

now Your open. line is

John Pitzer

think the being of guess question kind QX the little first for a than come would season, the March kind that am why that bit I to chain you I what year are much seasonal to the the in down kind up seasonality quarter? the strength DCG revolves the at just so calendar to revenue parameters that out just worse number. the around to that around I and the PC guidance below, I using healthy, So your supply for normal midpoint more lot the QX? repeatable me is a given than you with being is something quarter medium in sequentially quarter guess there revenue Was My comments March am be figure of XX% first curious in guys is trying don't five of not feels as about

Bob Swan

Bob. thanks, John, it's

things two enterprise quarter. XX% going growth it was highlighted, the DCG on, really in as one, in So Brian the up fourth

And strong a helped growth Number two, little end XX% one. more life was for frankly, so during seasonal extremely -- quarter. two growth the more a growth seasonal you enterprise, for more PSG PSG of in course the adjust So dynamic, by we get with number than seasonal of QX, bit you if expected sales normalized line QX that's maybe and enterprise a growth, to if of those adjustments. you make

John Pitzer

CapEx would churn then you come calendar the trend And you revolves guys around conference year sort down spending on above that 'XX you for be of my then you trend. it year albeit call thought quantify would of was calendar year CapEx, again that 'XX you a it Brian in on that question didn't second more 'XX and line kind calendar ago a I and think year to thought mentioned normal this

in big that’s about kind the yourself changing billion, on relationship 'XX light the covered here prepayments. how already the in trend by CapEx think we given and XX do Just of of line two But the of especially Micron uptick between being from I INFT? realized

Brian Krzanich

our of CapEx prospective of know kind memory you a right with on is, my increase take and in if at So revenue logic kind scaled our our growth overall you rate. look

time, over by would good business Bob's basis, going look place that plus this distributing I work that their Micron, helping that look really it, take development doing reserve enough we're we really that changing we're going memory, a market of away of additional the think across go This process. are that and capital. to we are job capacity what capacity And what main there tell to generations how for you more year market. and XXXX. people with have through demand we effect to that put in really in relationship that’s Mark do and been and can that’s overall demand capital at about really independent a we year, and is So two capacity what we doing that’s when reserve wanted about really line. in unit, year head upfront people really a the and the like memory the felt that’s actually willing to done really that And on to overall pay saw was as With we’re plus

and We at will year as analysis. same the John will 'XX that out at into okay of we say, look each end that look 'XX be

John Pitzer

Thank you evaluation, that Brian. for

Bob Swan

demand. trying technologies to in employee the we’re really match scaling and fund known developing is confidence business would follow will on to we're bit where -- those a the our the relationship, on help net to and we sorry, at just In I this the capacity customer and about we're they last that looking comment. of way just the talked memory Brian's grow call increased in customers capital to be conjunction the with

that means relatively billion. growth higher. what the $X.X is was flat in what XXXX, roughly XXXX net meant We capital as capital that for -- so So that our held

$X in conviction the more capital. have the fund We billion to customer growth base of

point effectively and just efficiently on the only for scale ago then in we’re memory, of trying technology our customer our we're growth make to other to for and And business. the terms that year remember of really well growth. our adoption outlook outlook So ahead focus of logic

demand capacity of in with and forward have our now that number probably logic, incremental the logic our in that's placing if probably for our kind about XX-nanometer for billion XX, similar higher as billion were XX.X implied XXXX. both XX We’re we X.X Obviously, take and growth billion outlook time, guide was X-nanometer.

Operator

Thank you.

Our from Morgan next comes question Moore Joe Stanley. from

open. is line Your

Joe Moore

you got OpEx to but then, maybe costs about what And you've down, also lot, graphics on effort, going you’re could look you used you if you've with seems just obviously some that wonder your NAND pretty spend I discipline been I it bringing spending? money talk we -- like be to about if at competitors to that talk are a at shared announced other discrete there if some initiatives point Micron.

we something and think about is just, coming increases? should can potential those this puts the of talk down So sort takes to you there are? And offset about

Brian Krzanich

Sure. to to ’XX this let in cover we’ve But dollars. the start ramping so the give And that. is no given you and of all The there effect. R&D Joe, our discrete like a those factor Bob R&D spending in memory I’ll all of time, and we’ve of graphics so things already then kind really of an overall spend. really, under spending efficiency I’ll detail has things for out offset

some other other increasing and GPU of increases artificial the some well of autonomous the are So driving spending, in intelligence emerging there as some like areas. in things around

by overtime NAND play but right, of we spending getting the products, spending across not good like efficiency on to that of in as where core And product we’re we in You’re are fund new offset well as R&D, feel the our R&D. rest were our going driving into efficiencies compete being those efforts can will really these we a our while place percent initiatives keep revenue. of innovation and from continued increase

Bob Swan

to XX% XXXX to from XX% We’ve of just roughly Joe, XX% to of to down numbers a add come second at I'll Brian's revenue. word. XX% some kind half of

we’re and in investment our we’ve been terms trade-offs we’ve that coming been our real doing two, of making been growth; down number where paying we're two money. the One, higher making in we’ve as off things. So investing

guidance we’re expecting level. As roughly with our annualized flat we our an as ’XX, XXXX to be into go spending go level into in spending implied we

on that, and underneath to a our and of company data-centric getting to and we the going board. leverage efficiencies marketing, become G&A functions across -- more continuing and drive or BXB sales we’re as So, real

investments the the real continued couple in progress intelligence driving, while made Moore's and second autonomous half, progress course like things critical Including continuing for of and making graphic, to to discrete during last we’ve So, invest the the expect we years. artificial make Law.

Joe Moore

you about investment, of think separation of long-term you means? sort -- products as NAND focus have AND your Micron what of more the sort guess to Or XD I that asked a competitive you competitive me, that path Is to market? more XPoint? proprietary like people fully what more on NAND do your from on committed know from the

Brian Krzanich

of its separation little in -- you development independences -- XXXX work timeframe a of is specific. sort bit, and we real The in to clarify is again So, sure out when come it NAND Joe. think time make

on So, together point. plus to work we continue the to

good take as a products well. to and allaying this good just, tie relationship we and about foresee to market This Micron of about continues really aggregate or Company the at. continue the we be performance going something a The really and data a our future are it’s is separation to where And are really our one. will not So the with have that center-centric of and it customer to the looking in be we talked I relationship. is about direction one

continues And R&D are be so, effort. is the spending joint in NAND we now about a right XPoint specific, to XD really a talking

Operator

Thank you.

Our next from Capital BMO with Markets. question comes Ambrish Srivastava

open. is Your line now

Ambrish Srivastava

back DCG go I up wanted the to specifically to on margin front.

seen quarters. We high my model plus eight correct, if have not been the handle is it's

level? that that what follow-up So, please the speak a got sustainability you to the kind margin? of can of to these up I you drivers things. have And for then were the And

Bob Swan

so the the and Yes, we expectations indicated grow growth. things you to full-year XX%, but XX% A expected the couple we year. into of we low said for and be fourth to we came throughout in in we were the the quarter, our that obviously, course that year of started to obviously, margins know out we

investment leverage a contributor. big build our existing on we'll was So

the Brian really for in so quarter cloud to will were ASPs. XX% that up growth ASPs was the or Secondly, accounted us enterprise, its paying for point ASPs whether performance comps higher performance X X% highlighted, that. And and customers for of as

continued And last in that that data remember year cost I center think X ago. may on unit charges warrantee then some fourth quarter, points last and was we Third, roughly progress business year's had IP-related you costs.

little we're strong for So good last year's, paid improving. cost ASPs But deflated. performance and unit volume leverage, customers as

Ambrish Srivastava

expect level should we forward this So Bob? going

Bob Swan

to think get far away to be I XX with the I Yes, honest from too wouldn't XX you.

But and growth not stay gains. kind the go that’s to sluggish in I strong seasonal we we a real been years. more are was of and into go nature year we market think think course over 'XX. are levels somewhat of performance we at in it enterprise ASPs anticipating strong share these quarter, high or of consistent enterprise real believe last seasonal as we into in as the our couple think the we so the cloud XXXX, Comms, growth good performance momentum

Ambrish Srivastava

area from cost next then never, on will long an were sort gross I as my the for RAM. never the competition well qualitatively were of And of as margin shouldn’t in year year, not the for a in they say full But the area -- you time. because mention a surprised XX provided they adjacencies follow-up the for a didn't you AMD have impact an from now product I A, was

you then So, question you the quantify mentioned? impacts seeing competition? is, be any Are to two B, possible that in? that are would factoring it you've And

Bob Swan

three for be of end couple our and things be But to that -- XX% performance has been that both of are XX-nanometer last it's range, costs, and more and -- driving to for in margin. we've more deterioration long-term XX% that always at the guidance the the this in and highlight XX% we've getting Yes, characterized to had unit gross the years year XX% years and I'd contributors several upper including first our to lower start that in lower maturity of the last and of margins with I'd terms just gross that maturity range. will

for company, don't but and we've XX-nanometer cost we no. the improvements we most As an we cases environment, modest dramatic increasingly part, ASP the into 'XX, that's go over from the competitive on profitability entire matured see some contributions curve, because anticipate yes,

So, year. the we'll products the of see some continued in during improvement XX-nanometer course

Those growth EPS modem. those been investments we've contributing however, year-on-year of our businesses those product are in our the businesses of margin. growth; both adjacent Secondly data-centric really making that businesses, growth of accelerating our lines the both in the to and lower we're have

our So our modem and gross a memory impact mixed margins. in on success having is

to ramp and as weigh we we're that XX-nanometer going to ramp our the area costs is third where of going are. from year the and second the yields curve into way on coming we're margins, going startup the down more the to production is are the half where up where XX-nanometer The costs begin develop to

the of roughly minus one, kind roughly rounding characterize are three roughly If I as see two, to we plus those. things it. minus those were So, one,

Brian Krzanich

about question your competition. understand I specifically around

at to it as I compete think environment, competitive we're every look the customers. and out for year our we

in And each so we appropriately factor year I that think against the competition.

and competitive Xeon So our for that and performance have forecast. overall think highly our at believe have product the we in we look Scalable, environment a we adjusted has, roadmap that roadmap, great we competitive

Operator

Thank you.

from from comes Bernstein. Stacy Our next question Rasgon

now is open. line Your

Stacy Rasgon

gains, walk guess maybe you get but free kind flow can't operating Firstly, of can flattish free Taxes me ICAP way was you with what? the flattish growth. through payments. memory It you the the to rest just get maybe through? cash revenue us billion your a working half to income cash waterfall? some dollar I a CapEx does I us your capital of of X% from? on flow Can of there, the draining third or where comes couple walk Are

Bob Swan

cash $XX first billion cash flow, up free higher Yes, XX% first earnings. year-over-year, roughly

guide 'XX up there roughly has relative is that XX% EPS in has grown of in Our XXXX. guide to depreciation

higher cash So earnings. that has just

supply obviously, higher then is contributed bit the strategic things And third, strategic do working partially XXXX. longer offset Secondly, Stacy, And a higher so capital, growth agreement were lower offset; three capital expect more earning, CapEx. supply an those have through we all customer working go cash by capital as positive. and we of higher we better

Stacy Rasgon

corollary is want adjacent Okay, of much memory data gross I of can next to adjacent, give your from about that gross the And quarter mentioned that guess feeling that X%, XX you mostly businesses. us center memories, businesses ask a Of delay given XPoint? statement year must modems a core delay billion your was guess margin so of one one you that in be to pressures? my -- versus how versus that in of I coming decent core in I the the as kind a follow-up,

Brian Krzanich

a was That been that that are just now. No, to out those delayed we fourth XD SSD quarter has answer and being Stacy. question, addressed NAND start NAND in was the -- with

So, that was that comment.

Stacy Rasgon

ahead. go sorry, -- on growth And

Bob Swan

businesses. we our first as I your PC-centric think In the characterize question. decline in billion, roughly on low digit single XX it

may on the we customer be throughout a the CCG to accelerate So be implied is, believe strongest little calls said segment our businesses digits of business to and and data-centric obviously mid the of growth PC memory. makeup data-centric mid the There within that bit team the that more partially In on a PC-centric just data-centric we be Brian be teens, will NSG guide, would growth that that in segment Those in would modem growing we would XXXX. overall adjacency decline that. function that within the highlighted, of the decline offsetting and businesses. course single expect be

Stacy Rasgon

the is performance what growth data the strong DCG implies unprecedentedly QX? So, memory the growth, the given strength of for and in the

Bob Swan

wins will the will that the that on for center rate XXXX be really overall part, For have won't growth late most and NSG date impact business. an of the in go through

So the it's of NAND of year. growth course during primarily about the XD

Operator

you. Thank

Evercore. from Muse C.J. from comes question next Our

Your is line open.

C.J. Muse

them memory? start-up, I logic if how share guess about then couple you’re you CapEx on thinking expecting could when you Curious, spend of with depreciating those with and I can are put us together. us, And share begin housekeeping questions, of to XX-nanometer between kind you if could costs? the

Bob Swan

gross roughly in CapEx, First, billion of agreements indicated supply year X we’ve the customer on the billion. the XX of capital we that got strategic

our that billion primary growth to kind $XX of year-on-year. mentioned into $X pieces; change break a So in no roughly memory, And XX-nanometer. is $X as that continuing we and capital capital net function logic year. CapEx billion grow I’ve Again, employee net is a two the up of billion earlier

the course node investing third, next scaling in Second, during And X-nanometer of year. up the XX-nanometer.

are things in CapEx for increase three logic. the driving those $X really billion So,

but some bring of is we of when on. as question that -- depreciating. The we on bill your that is we year in second we equipment depreciated, that equipment as half so equipment second the online, the There ramp we when for part turn XX-nanometer, start being as online bring turn now we

to the So the contributors -- second the That’s circle. to And we’d expect depreciation ramp gross start the to of course full our contributors the one half deterioration of growing. margin be year as one during really for to come to the in bill year, of we XX-nanometer. that’s

Operator

you. Thank

Arya Vivek from Bank comes from question America. next Our of

Your open. now line is

Vivek Arya

for I’m might the their resolution Brian, many in one, then sales industry says, thinking on processor on decelerate you purchase, you customers of pricing any of one issues? saying of accelerate customers on. have might later others purchase that that first Are security cost curious. effect is For and baking There line that

the implications positive So and from I’m near-term longer financial how just at you’re this or looking term? curious issue negative

Brian Krzanich

break a kind that material cost impact it for spending and don’t and so on baked product two talked we cost or exploit or that answers of expect into in any any our this security of of we’ve about From we try Sure, standpoint, we've Vivek. kind of that.

the any first And how but on we as all go think that So sure forecast it's competitive add opposed the we we've or spending changes in. our down. the year weeks the of only and that spend weeks and a kind fourth go our materials primarily to make issue, increasingly the year on through right not continuing we to so products time actually and a focus that through any the focusing energy it. checked through checked now forecast baked as add level, result year things. to highest environment right in bring the lots standpoint, other to against didn’t as signs those of also changed here software our it an realizing any first two performance that incorporated our had pretty I'd as balanced we hardware this you comment much or into and then hasn’t the made tell of in tell now, I you fixing patches at market, change it's Brian's a we that’s and make it is that really earlier, on go short-term we're From best the we of at as half there I'd forecasting are prior to we forecast seeing not forecasts for of highest few flow. we up forecast looked and would those of the seeing we The

Vivek Arya

And follow-up. my as

I business? the memory about segments, just we think just but had For how color just growth strong sort some 'XX? than apples-to-apples DCG double-digit other about that think group entire should you data a here growth growth around the includes we in a full-year, should understand in the centric very which in how gave DCG of

Brian Krzanich

different first Throughout 'XX, then the -- to of kind the guided And high course dramatically we QX throughout executed single-digits; of than of sorry, throughout. course the year, kind took three of we quarters we that the and from wasn’t of us the that seasonal the XX% exception really And of a growth year double-digit low enterprise. the or high really for for spend with high-single the year. digit to

out not As laid and back do we we difference go how a a single-digits anticipate to the the don’t DCG we 'XX, space, go the think dramatic in expect down negative year-ago. range into things that. We that therefore will in enterprise

little elevate real growth if important to on So cautious how the rates our just as we that think I a two and XXXX we areas volume how And our market little cautious about when the be year, did TAM, are our income. where of net and business. PC is to -- that our in be tend kind growth we we to get a think we from we cautious about to there tendency higher be benefit outlook. more is little a up be on to back little and conservative, covenant DCT out that's for That's plans the XXXX. we for plan flow through is bit the do maybe in are putting turn and and strong to the we the on to reason we believe think year from together assumptions be it. thinking If we enterprise PC to TAM, we line, we same cost thing will a One about cautious it's more tend as benefit

we out anticipate as spending assume enter in haven't change dramatically and XXXX don’t really of the a in enterprise led because growth XXXX course how year. DCG we So we CIO I the different trajectory of

Operator

question last from our from Curtis Barclays. you. comes Thank Yes, Blayne

is open. line Your now

Blayne Curtis

back go ASPs. DCG Just to the wanted to

plan, about nice of You and ramp a scalable. kind then you think being tailwind of of at but higher to you a percent were got I the enterprise think implied talking scalable I

on that strokes year to broad So just where And us kind of getting here? is your just wanted scalable could ramp the the expectations go? give how talk through where

Brian Krzanich

line was saw right Scalable stock Xeon I'll number some people So talked more ASP. And up in start with you you in the on can The not the drove ramps buying our Xeon ramp Bob DCG but when Xeon similar Scalable, prior Scalable what QX products of roadmap. necessarily all. detail which about on and add is

People they're not distribution higher as uncommon to stages typically and other early want come the then up. in market higher a parts the that's the and in beginning. performance buying part, buyers of priced ramp. performance, And their they opened other highest the the buy So, kind come of they fill parts when and at out in

on ASP the So, a up more ramps SKU, buying high and was and necessarily they're on parts about performance with schedule aligned than ramps statement. volume higher

Blayne Curtis

through just line just XX-nanometer move kind it the two kind the between and walk move as bigger XX-nanometer. startup just that March just memory And then -- you adjacent Obviously, look as well for a doesn't they wonder, of of fully. those back in picking want also mentioned, if ramp on you also signaling QX, want go gross the through as back go year I I our from drop you're big Bob, on margin costs to the as and well is factor? what's to you out businesses I

Brian Krzanich

to year modem year rest QX as strong bigger our So, the growth. going accelerate mix the the and for a for are to of actually both in dynamics be the factor overall and continue business memory

biggest impact. that's be to going So the

just also yields kind scale need of think the and will improve right as the year, we but the will volume, of I during an to gate year. course off XX-nanometer have impact throughout continue the

So that's hopefully helpful.

Mark Henninger

thank Alright, call. us and you joining please up Operator, wrap today. all for ahead the go

Operator

conference. This for thank and you Ladies your program. participation today's conclude today's gentlemen, in

Everyone You have disconnect. great day. a may now

Intel (INTC) 25 Jan 182017 Q4 Earnings call transcript